The Singapore economy posted a slower growth during Q2 2021 on the back of a resurgence in COVID-19 infections but still posted the strongest performance in over 10 years against last year’s severe contraction in comparison. Singapore’s prelim Q2 GDP for this year came in at +14.3% after the sharp contraction by 13.3% in Q2 2020, and beating economists’ forecast for a reading of +14.2% instead.

However, the Q2 GDP contracted by 2% QoQ against a 3.1% QoQ growth seen in the first three months of the year. The contraction was driven by the Singapore’s government to impose fresh restrictions in May to combat a fresh surge in coronavirus cases across the city state. However, restrictions are being eased over the past few weeks as COVID-19 vaccine rollout gathers pace.

The economic growth seen was powered by a surge in construction and manufacturing activity. While the construction sector grew at 98.8% YoY after last year’s lockdown, the manufacturing sector expanded by 18.5% YoY, powering the uptick in the GDP on a yearly basis.

Impact on the SGD

The Singapore dollar is trading weak following the release of the GDP figures. USD/SGD has been trading bullish also on the back of a stronger US dollar as markets look forward to Fed tightening its monetary policy sooner than expected.

However, so far this year, the SGD has weakened by around 2.5% against the USD, especially after the latest wave of the pandemic that has swept across Asia and hurt the economic outlook for the region.